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Wednesday, December 21, 2011

The focus of the self-termed 99% (or at least the 1% on the streets that say they represent the rest of us) has been income inequality, and there is little doubt that income inequalities have grown over the last few decades. However, the remedies put forth by some, when they do offer up remedies, are usually focused on traditional taxation: tax the rich and give to the poor - it seems our prescriptions to problems haven't much changed from the days of Robin Hood.

There are other options which are seldom if ever discussed. One thought that comes to mind is specific to charitable donations. Every year, particularly around this time of year, billions of dollars of private charitable donations are provided: often to the those in the lower and mid-lower rungs of the 99%. Individuals alone contribute to over $200B every year in charitable giving, often matched by corporate contributions.

So, instead of a deduction, and perhaps as a political solution to get around arguments of class warfare etc., the federal government could instead encourage the private market to ramp up what they already do every year. The government could honor, with all the full force and faith that our government can provide, a match on every dollar of contribution made to certain charities that benefit the poor or down-trodden. This helps the poor like a tax cut would, albeit through a charity organization; it helps the rich by increasing satisfaction to a cause they already celebrate; it helps government by partially deflecting arguments of class warfare - after all the government is simply mirroring the actions of the private market and the 'revenue' isn't coming from increasing taxes on the rich.

The revenue could at least partially come from eliminating the need for a charitable deduction (money that ordinarily would go back in the rich guy's pocket) and replacing 100% that program with a matching program (where the money would go to the poor guy's pocket - but a poor guy of the rich guy's choosing!). Personally, I'd be in favor of putting new dollars into this kind of a project for at least a time, since there is no sign at this point that government spending is causing any serious inflation - though I understand that might be political suicide.

There could be issues politically with setting up a federal matching program, not the least of which would be deciding what charities could be supported in this manner. There would, for example, need to be a minimum threshold by which the private citizenry would have to contribute to a particular cause for the match to kick-in. IE., if one crazy nut donates to the 'poor satanist's society' or some such thing, the government would not match that obviously. But, I suspect since the government already has a list of 501c3 non-profits that many corporation feel comfortable in allowing their employees to associate with, this picking and choosing may not be too difficult.

All this is not to suggest that I disagree that certain persons should be paying their fair share of taxes (and they aren't). But it is a suggestion given our political reality and given the pressing immediate need for a solution.

Thursday, December 15, 2011

I would like to suggest that Kalecki's list of possible reasons why some might have reservations about a jobs guarantee program is sorely incomplete.

His three reasons, as Heteconomist lists them:

The reasons for the opposition of the ‘industrial leaders’ to full employment achieved by government spending may be subdivided into three categories: (i) dislike of government interference in the problem of employment as such; (ii) dislike of the direction of government spending (public investment and subsidizing consumption); (iii) dislike of the social and political changes resulting from the maintenance of full employment. (emphasis in original)

All three of the above, one could argue, point purely to a conservative political-ideological point of view. According to Kalecki, it seems the uneasiness some might feel stems from three uneasy free-market invasions:

But I'm uneasy with the idea of jobs guarantee; and while I might have some discomfort along the lines of the above (to varying degrees), my true discomfort stems from some additional reasons given our existing government structure (including but not limited to):

1. Final decisions (running the business/employment programs, deciding what programs are best to do and what aren't etc) would be made by politicians. One must merely observe today's political environment to see that, absent a Utopian government, the logistics of such an operation, even if attempted with public-private resources, would likely fail in the long-term. How would these decisions be made? Who gets hired where, and based on what?

2. Unemployment, while unsavory, does serve a purpose. It weeds out the bad-acting laborers in good times. It's the bad times that is of concern - it's during deep recessions that even the average-actors are weeded out of the labor market. JG assumes that the recessionary environment is the norm or majority, when one can argue it is not. Why should the government guarantee jobs to bad actors (drug abusers, truant former employees, abusive former employees, lazy former employees)? Why should the good actors have to work to find a good job comparably? If I'm the good actor, who potentially values stability over wage, why wouldn't I reduce efforts to improve myself or advance my skills, and just take the government freebie? Related, if unemployment is pushed more toward 0% (2% or whatever) as an employer or last resort, the adult now has lesser incentive to re-skill or re-educate themselves - something a dynamic economy must do to survive.

I haven't closed my mind to the JG idea, but until someone attempts to formulate an extremely detailed plan, as opposed to just talking esoterically and abstractly as I've seen on blogs and in some MMT papers, then I have serious doubt that this jobs guarantee idea will ever be taken too seriously by anyone outside of academia or halls of philosophy.

Thursday, December 1, 2011

Did Minsky see a solution to our economic problems? Focus on the last paragraph of the following link: It seems he had a similar opinion 30 years ago that I do today - that there is no real solution right now so long as our political environment stays the way it is. And if you read closely, he suggests that that is unlikely to change unless our teachers of today (our academic economists and teachers of future leaders) wise up to reality. This suggests to me a slow process that must start with challenging the 'official' or mainstream economics of the day. Read the whole thing as it's one of my favorite Minsky publications.

Garth Brazelton

About Me

I work for the Indiana Economic Development Corporation as the Director of Operations and Business Systems, and I teach macroeconomics at Indiana University (Indianapolis). Previously, I was an Economist at the US DOT in Cambridge, MA. This blog does not represent the opinions of any of these organizations.